Demonetize the political class. Distribute away the centers of power. Take away their control of the money. Replace the Central Banks. Replace the deflationary fiat. You need one thing to do all this: MONEY. In fact, that's all you need.
The Ethereum Virtual Machine, or EVM for short, is the gateway to Web 3.0, and will become the global settlement layer. That's what I hear, but not what I see. What I see is a tokenized dystopia. It's an orgy of swaps, wraps, burns, stakes, mints, and questionable collateralizations. Missing from this mess is anything of value. What do dapps actually do? Nothing of note. They simply optimize interactions with more tokens to keep the orgy going. If any of them offered a legitimate business or service, they wouldn't have a token attached, they wouldn't make ETH an accessory to their crime, they'd price their business or service in ETH. By not adhering to this strictly, we have a developing case of Gresham's Law
https://en.m.wikipedia.org/wiki/Gresham%27s_law
where good money (ETH) is being pushed out by bad money (or at least what people have mistaken as money).
Money is not TPS, TX cost, or throughput. Those are all features of a blockchain. The EVM has a money problem, and the switch to PoS has only made this worse. I'll also add that stablecoins are digital counterfeits of inflating fiat with questionable collateralization and undeniable centralization. Here's an explanation on how the brilliant and simple stupidity of bitcoin doesn't suffer from this problem:
Money doesn't have an associated liability
Currency has an associated liability, which is debt, because governments issue debt to issue currency.
Energy is the world's only natural currency. It's required for the internet to work. For a nation state to exist. For a military, for communication, transportation, farming, everything. In this way, it is asymmetric to other commodities, currencies, and natural resources.
Bitcoin leverages energy (which has an associated liability) to create money without an associated debt. You can't counterfeit energy. But here's the wild thing, it incentivizes green energy to reduce its own liability. 10% of its network was green energy 5 years ago. It's now 35%. At this pace it will be OVER 100% green energy before the end of this decade which is where things get interesting. How can if be over 100%? Because, up to the present time, how has green energy been incentivized? Artificially, by government manipulation of the tax code: credits, deductions, import duties. But even this intervention doesn't work well when fossil fuel prices are depressed, out-competing renewable energy costs. Bitcoin is a missing link, and should finance the major energy projects of tomorrow, producing far more energy than it uses. Mainstream talking points won't tell you any of this of course, because news cycles run on 24hr timers, and innovation takes longer than they have patience.
Oddly, Henry Ford and Thomas Edison conceived of this idea in a raw way exactly 100 years ago in 1921:
https://twitter.com/mallardshead/status/1454781760911421440?s=21
Anyway, all the above resolves a contradiction bitcoin shouldn't be able to resolve, challenging most economic schools of thought, because it can consolidate four things into a singularity:
- central bank
- currency
- store of value
- commodity
We don't even fully understand that yet, but it will push out the bad money, in what's known as Thier's Law, which is the opposite of Gresham's Law.
The Bitcoin Network only uses bitcoin. Its proposed P2P scaling solution (Lightning Network) which is brilliant but at least two years from commercial usability, only uses bitcoin. It's a simple permisionless payment rail that any individual can use or anyone can plug-and-play their business on top of. All your services or products will be paid for in bitcoin by customers and users. No tokens. No fiat. No derivatives. Real businesses. Just bitcoin. And as a transactional epoch is reached, dollar pegs fade as fewer people exchange it for fiat, because they can buy and sell anything in bitcoin.
It's stupid simple, and that's the only way any of this works commercially. This is money. It doesn't have to be (and shouldn't be) difficult, because it's trying to consolidate a cumbersome and grotesquely complicated global financial apparatus. Make it stupid, make it simple.
Back to the EVM. It has a money problem. And it's about to have another problem after the Merge (mistakenly called ETH 2.0):
What percentage of the ETH staking nodes will be run by CEX's? Anyone care to guess how many are run by them already? 65% on the low end. Some have suggested that number is actually 85%. And what about how those staking rewards are allocated after the Merge? They benefit bigger, longer operated nodes. It's really no wonder why CEX's love PoS blockchains so much. And what about the hosting of these nodes? Where are the servers? AWS? Yeah, a majority of them are currently run on AWS servers. So to wrap this up, the majority of the network's security (staking nodes) will be owned by CEX's. Remember that saying that starts with not your keys? How long before the US government makes doormats of these compliant CEX's like they did Gmail, Google, Facebook, etcetera? How long before another Edward Snowden emerges telling us the IRS or NSA has rails built directly into all of them? A few days ago I watched this sub fill up with posts praising the Staples Center renaming to Crypto.com Arena. To those that applauded, that's about as terrifying and clueless as it gets. It's the same thing I said about the applause of EIP-1559 when it went into effect this August. Anytime you have an upgrade that burns, reduces, or manipulates tokens in any capacity, it's difficult to respect that as impairment-resistant money, or with any trust. This leads to my next complaint of the EVM and smart contracts: governance.
Raise your hand if you think democracy is a good idea for a blockchain with global ambitions. Like Aristotle, I believe it's a terrible idea, here's why:
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There's no way to know how many tokens anyone owns, which impairs voting and makes it unfair
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There's no way to stop collusion
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Voting, as Aristotle said, is a skill
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50% of all people live in two countries (India and China), a percentage which is growing annually
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There's no way to opt-out of upgrades
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There's no reason to believe people won't vote for (or suggest) proposals that pump their bags, and the time frames on these will get shorter and shorter
Using bitcoin again as an antagonist, it dashes the democracy in favor of immutable rights. It doesn't matter wether you have 1000 BTC or 1000 SATS. There's nothing the former can do that the latter can't. You can't vote, you can't provide network security by staking, you can't collude, you're transaction prices don't vary, you have zero special privileges.
You can be as rich as you'd like, but you will have no power.
As for upgrades, they're backwards compatible. Leave your wealth in a wallet for twenty years after your prison sentence for burning down your in-laws home, and you can come back to it. As for the consensus layer, if the super majority of hash agrees to an update, they're optional, miners can opt-out.
Right, so everything we've talked about so far might be enough to break ETH, but not enough to get it under $1. This might be: Zk-rollups. The following is a warning for all L1 blockchains, but we'll use ETH as the whipping boy.
The EVM is becoming a rollup-centric system. Even after the Merge, the next major upgrade will introduce sharding, which is more or less designed specifically to help rollups. But what will Dapps do when Zk-rollups reach full composability with all L1's and with eachother? This technological independence has been slowly building for years and will not end well, because fully composable Zk's won't require ETH's L1 to settle. They can settle on any L1. In fact, in time they won't need to settle on L1's at all. So what happens is this: L1's are seen as kings telling their Dapp colonies who they can worship, how much to pay, and what to do. That's the kind of taxation, or tea rather, that get's dumped in Boston Harbor...ushering in the DAO era?
L1 native currencies like ETH will have no value, having never established themselves as money, they'll serve no utility to Zk/DAO entities, because even the security of its L1 won't be compulsory. Then all hell breaks loose with staking. In an odd twist of fate, it might be BTC that finds its way into the treasuries of these colonies of Zk/DAO's like LUNA's founder talked about recently:
https://twitter.com/terrabitespod/status/1454158643079811076?s=21
L1 blockchains have moved fast and taken pride in breaking things. Unfortunately, they've broken their own base layers. I don't need decentralized insurance tokens to protect my Uniswap tokens that I swapped for SNX tokens so I can mint sUSD tokens that I stake in the debt pool to earn more sUSD tokens that I redeem by burning, then swapping into ETH so I can send it to my exchange where I sell it for US dollars. Along this DeFi pathway I've accomplished nothing of value in the world, I've spent hundreds in fees, had a dozen taxable events, and waited 3-5 business days so I can buy my girlfriend a birthday present. That's a tokenized dystopia. L2 is no better, it's a cluttered mess with dozens of competing platforms all claiming to do the same thing better. Most hard wallets don't even work with half the rollups. Next we have MetaMask planning on tokenizing, and ENS just recently air-dropped tokens. All this is like Egypt handing out clubs to its vendors. How long will the tourist stay upright on the camel en route to the pyramids? How long will the camel stay upright? This is not the future of Web 3.0 or decentralized finance. Neither will require tokens or anywhere near the difficult mess that the EVM has made of it for commonplace people. It's almost worse than the mess traditional finance has made of it for all our lives.
So in conclusion, this is why I've sold my remaining holdings and see ETH turning into a zombie protocol with unreliable nodes and a sub-dollar price: money, governance, centralization, technological independence, difficulty, tokens in perpetuity.
I do believe however, that ETH can outpace bitcoin until Q2 of 2022, but won't stick around to hazard it. I realize the first thing that has to be replaced in this world is money, and everything else will fall into place after. Only bitcoin has the DNA and one-dimensional simplicity to achieve this.
Wishing you the best,
—Mallardshead 🦆
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